Allocating Selling and Administrative Expenses using Activity-Based Costing Shrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows $680 per unit Cost of goods sold 410 $270 per unit Gross profit In addition, the company incurs selling and administrative expenses of $303,170. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailer's sale of Shrute copiers to consumers. The budgeted activity costs and activity bases associated with these activities are Budgeted Activity Activity Activity Base Cost $38,070 31,500 233,600 $303,170 Customer service sales order processing Advertising support Number of service requests Number of sales orders Number of ads placed Total activity cost Activity-base usage and unit volume information for the three customers is as follows: Kosmo Co. The Warehouse 60 250 20 510 Supply Universe Total 270 900 160 1,830 Number of service requests Number of sales orders Number of ads placed Unit volume Required: 1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar 10 110 20 610 200 540 120 610 Activity Rate Customer Service Sales Order Processing Advertising Support 2. Determine the activity costs allocated to the three customers, using the activity rates n (1) per serv. req. per bid per customer design change Activity Costs The Warehouse Kosmo Co. Supply Universe 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2016, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Enter all amounts as positive numbers, except for a negative income from operations Shrute Inc. Customer Profitability Report For the Year Ended December 31 The Warehouse Kosmo Co. Supply Universe Revenues Cost of goods sold Gross profit Selling and administrative activities:_ Customer service Sales order processing Advertising support 680 per un Cost of goods sold 410 $270 per unit Gross profit In addition, the company incurs selling and administrative expenses of $303,170. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retaller's sale of Shrute coplers to consumers. The budgeted activity costs and activity bases associated with these activities are: Budgeted Activity Cost Activity Activity Base Number of service requests Number of sales orders Number of ads placed $38,070 31,500 233,600 $303,170 Activity-base usage and unit volume information for the three customers is as follows: Customer service Sales order processing Advertising support Total activity cost The Warehouse 60 250 20 610 Total 270 900 160 1,830 Kosmo Co. Supply Universe 200 540 120 610 Number of service requests Number of sales orders Number of ads placed Unit volume Required: 1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar. 10 110 20 610 Activity Rate Customer Service Sales Order Processing Advertising Support 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). per serv. req per bid per customer design change Activity Costs The Warehouse Kosmo Co. Supply Universe 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2016, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Enter all amounts as positive numbers, except for a negative income from operations. Shrute Inc. Customer Profitability Report For the Year Ended December 31 The Warehouse Kosmo Co. Supply Universe Revenues Cost of goods sold Gross profit Selling and administrative activities: Customer service Sales order processing Advertising support Total selling and administrative activities Income (loss) from operations
